The Chinese yuan rose to its strongest level in almost four weeks on Tuesday – a sign its depreciation trend may be a thing of the past, analysts say.
The yuan strengthened to about 6.22 per dollar after the central fixed the currency's daily midpoint stronger than market expectations for a third straight day.
"Unexpectedly low fixings is a strong indication that we have seen the peak in USD/CNY," said Irene Cheung, Asia FX Strategist at ANZ.
The PBOC controls yuan trading by fixing a daily midpoint from which it can rise or fall by 2 percent.
The move marks a departure from earlier this year when the People's Bank of China (PBOC) engineered sharp yuan depreciation to shake out speculators betting on one-way appreciation.
"We have been of the view that a resumption of renminbi appreciation would occur over the second half of the year. This could now be earlier than we had anticipated," she added.
The yuan has risen over 30 percent against the dollar since its landmark revaluation in 2005 but saw first its first period of sustained weakness in the first four months of 2014, falling 3.43 percent against the dollar.
Strong Chinese economic data has compounded ANZ's view that the yuan will resume its appreciation trend.
"Our view was conditioned on a rebound in Chinese economic activity. There are certainly signs that the Chinese economy is stabilizing," added Cheung.
China's trade surplus widened to $35.9 billion in May from $18.5 billion in April, with exports up 7 percent and imports down 1.6 percent. Meanwhile, consumer inflation rose 2.5 percent last month, faster than April's 1.8 percent rise.